How much should a SAAS business spend - the ``40% rule``.

A new metric is doing the rounds, called “The 40% rule” for companies with a SAAS (software as a service) revenue model:

What does this mean in practice? The calculator below (we’re trialing a new plug-in, click ok on the pop up) is a guide on what your spend budget should be for 12 months. It works best if you’ve got at least $80K / month in revenue as a starting point.

While it’s a guide, if you’re reasonably close, your investors are more likely to understand what you’re spending and why you’re spending it. Don’t know these numbers? Keep scrolling down for a guide on what they are.

A. Revenue MetricsIf you’re generating at least $80K / month in revenue these are the numbers you’ll need at your fingertips, so it’s good to get familiar with them:

Revenue / Customer / Month – how much do you bill, on average across your full user base, per paying customer. Remember to take GST / VAT out. This is also known as RPU.

# Customers now – how many paying customers do you have (it’s the same number you use in the calculation above).